How Will Filing Bankruptcy Affect My Credit?
Inevitably every bankruptcy client that I meet with asks how filing for bankruptcy will affect their credit and if they can keep a credit card open after filing. A petition for bankruptcy will be reported to the credit bureaus and - just like any other derogatory credit history - will remain on the credit report for several years. This is not to say that a person who has filed for bankruptcy will not be able to get new credit - in fact, many people are offered new credit cards very soon after the bankruptcy is over.
Lenders and Bankruptcy
The bankruptcy will simply be a factor that a potential lender will consider when making a new loan. It is not as dramatic an event as it once was; perhaps, because so many people are filing for bankruptcy these days.
Of course the credit available to someone that recently filed bankruptcy is not given on the same terms and rates as someone with perfect credit (not to say that most people considering bankruptcy have perfect credit when they come to see me). The bankruptcy puts an end to the bleeding - so to speak - and now it is time to reestablish a good credit history.
Reaffirming Debt
Concerning the ability to retain a credit card throughout the bankruptcy, it may be possible to work out an agreement with the creditor to repay the debt in exchange for retaining the use of the card. Although, in my experience creditors cancel the card as soon as the notice of bankruptcy is filed. Moreover, I almost never think it is a good idea to repay an unsecured creditor simply because a person wants the use of a credit card. Isn't that what got the person in the problem in the first place? My advice: Use a debit card and include the credit card debt in the bankruptcy.
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